FatKat struggles

This bothers me and I will warn Anoymous upfront that smartalec remarks on this will be deleted. This is way too important and impacts peoples’ lives. I won’t allow this kind of crap on my blog.

I don’t know what the solution is. I hope that Fatkat’s struggles are truly a reflection of the downturn and that Fowler can turn it around.

I have felt for a long time that orphaned companies like FatKat (they are the only serious player in the ‘Chi and one of a very small handful of animation studios in New Brunswick) are at a disadvantage. Yes, they are not competing for labour locally but in the long term all of the data shows that clusters of firms have a better chance of collective success than onesy and twosies here and there.

If we want to grow a cluster of animation firms there are specific steps that can be taken such as implementing a tax incentive structure like six other provinces, focusing on churning out talent from the educational system, linking into the global animation industry and attracting a mix of national and international firms as well as local entrepreneurs.

Anyway, I don’t know the answer. I have chatted with several industry players and most are bullish that the industry could be a serious economic driver for New Brunswick (they point to the growth in online and mobile gaming and the use of animation for learning and other applications) but we need to figure out what the spark is – what is the fuel that can be thrown on the smouldering fire to set it ablaze.

54 Responses to FatKat struggles

I agree it is a terrible event that affects workers, suppliers, communities and taxpayers.

However, I have always been skeptical about IT in general and all the hype about animation. I sincerely wish the best for any such venture but did our enthusism contribute to its demise? Why did we think one company with one major contract was the start of an animation cluster that was going to reinvent our economy? Where is the competitive advantage? Where is the staying power? where are the customers? Where is the profit potential?

Don’t get me wrong, I want these guys to succeed and share in their pain but sometimes I get concerned when we celebrate what the media and government consider a success. Success to me is a sustainable, profitable business.

Hopefully this is a lesson from the school of hard knocks and these guys are back in the saddle soon.

That’s REALLY bad news. Tax incentives are only part of the solution-and a small part. As is fairly obvious, paying less tax makes no difference if the entire industry isn’t making new product.
Again, let’s say that New Brunswick had a provincial television station like ontario, Manitoba, and Saskatchewan. The bonus part of that is that during hard times it helps keep workers at work. The company now, for all intents and purposes, is history. I don’t see how a ‘cluster’ of animation companies in Miramichi gets this company more contracts.
It’s getting fairly obvious that there are a lot of examples around now where nationalizing industries is the ONLY way to go. Even giant newspaper companies are hitting ‘dangerous’ times. Community television is about to go the way of the dodo and even if you started a viable internet ‘station’ it’s doubtful there are enough companies out there with the capital to keep it afloat. The benefit of government industries is that during hard times they can keep workers working, unfortunately, the private market lays off people at the first sign of trouble, which makes the recession worse because more people can’t buy ‘stuff’ (not talking about FatKat here).
Having said that, the company itself (I think) produces ‘happy tree friends’ for online. Animation is one of the best teaching tools available, the government of NB could help by instead of giving them money to produce, well, nothing (no clients), they could use the Happy Tree Friends to help teach french, history, reading, etc., to elementary school kids. That’s one of TVO’s biggest markets for its childrens shows. To steal from a rant, IF the province can afford a million dollars for a ‘cultural centre’ for Dieppe, then the arguments against a provincial television station are pretty thin.

I can’t say I know much about FatKat or animation in New Brunswick but the first thing that occurred to me was, as its an aspect of film (or can be), how did provinces like Ontario and BC (and to a lesser degree, AB), build their industries? And are there ways the steps they took could be replicated here? Maybe NB has done that; I don’t know. A few of the key advantages, at least as far as traditional film goes, was the dollar here vs the U.S. dollar and the proximity to the U.S. industry.

An aspect of flash animation is its frequent web use. To refer to what Mikel mentioned about government industries, a flash animation studio could be producing material for the NB government web sites (which are sadly in need of a major overhaul). Granted, this kind of thing isn’t going to generate a robust industry but could be a supportive revenue stream for an industry.

Has anyone looked at animation on a world scale and identified where the major competition is and what it looks like to better understand how to evolve to stay in the game?

I have to tell you, this is a bad sign. Let’s just say, we need at least a dozen or so of these types of businesses in the chi, not less.

Maybe this is one time the Graham government can see fit to give them a bailout? During good times, not so much. But if they see this as a viable industry to grow on, they should protect it. much like the auto industry was protected heavily during the Clinton years…which showed a recovery after a slowdown. In other words, they received value for their investment.

What is killing FatKat is the NBFilm tax credit(I think that’s what it is called). They were losing bids to firms in other provinces because their tax credits are higher thus they cannot submit lower bids to Dreamworks, etc.

When your value add is being the economical alternative to other firms it becomes harder to compete when other markets are more competitive in the region in relation to their tax credits.

Rather then cutting each others throats, the maritime provinces should come together, esthablish a tax credit for the region and build complimentary clusters in each province to support the growth of a vibrant animation sector. Why go at it alone and fight for scraps when we can go conquer the world together?

And before anyone takes a personal swip at FatKat for building a company in an area where it is desperately needed, I leave you with these quotes to consider:

“Remember the two benefits of failure. First, if you do fail, you learn what doesn’t work; and second, the failure gives you the opportunity to try a new approach.”

“Remember the two benefits of failure. First, if you do fail, you learn what doesn’t work; and second, the failure gives you the opportunity to try a new approach.”

This is so funny, in New Brunswick! Wonder why Robert Tozier didn’t fail, or Doug Young, a complete nothing didn’t fail even after full rejection by the people? One could go on and on. I guess there are no good books on the History of NB eh? So you would of had to live it to see how far out of it some of you are!

I don’t know much about that sector in Atlantic Canada but I am wondering if there are similar companies in Halifax and how they are faring. The reason for my musings is that I have always been amazed by how a company like FatKat managed to survive (and grow!) for so long in the middle of nowhere (no offense!). I agree with Anonymous 11:11 points (Where is the competitive advantage? Where is the STAYING POWER? And most important: WHERE are the CUSTOMERS?) (sorry for the capital letters)

I also agree with Trevor’s point. It’s also interesting that the word “failure” comes up when it appears they were a success and only now, in the current economy, are having problems. I don’t see that as failure but a reality asking for solutions.

I’ve often wondered if a problem here in the east, at least in NB, is a fear of failing and a consequent approach of playing things safe, doing what has always been done, and thus failing in a long, drawn out way.

At the risk of sounding trite, better to fail big than succeed in a small, insignificant way. (Easy for me to say. Maybe the failure was not trying to build on the success of FatKat?)

@Bill
You only really fail when you quit, but I felt it was important that the word fail is used because we have a real problem in our culture with this word. People fail every day, what’s important is that we learn from our mistakes and forge ahead. You’re point about failing big is dead on!

“I’ve often wondered if a problem here in the east, at least in NB, is a fear of failing and a consequent approach of playing things safe, doing what has always been done, and thus failing in a long, drawn out way.”

Could be Bill? I also think that there is too much of a government presence in business in New Brunswick which has allowed those who receive generous subsidies to move forward (not always equitably) while those who don’t meet a quick death. Such an unfair economic climate may lead other possible entrepreneurs to hold back or ultimately move their ideas and enterprise to another region or country that has a more favorable tax structure for business, not to mention less corporate welfare practices.

This coming from trevor, who according to his profile never completed grade 7, possible why he unaware the above non-anonymous people didn’t succeed in New Brunswick, and in fact trevor is among the many who didn’t succeed in NB, nor can name any NB success’s since the slipping in of the NB OLA. I also refused to allow MY spell check to correct your spelling! It is time you learned how to aquir and operate your own. Never step in water unless your sure its not , over your head! lol

My son’s tax preparer claims he certainly had no fear, nor did fail in his 6 months of contract work in Alberta! Or are you boys just trying to get a quote that will go down in history, like Churchill? My other 20 friends and relatives show no signs of fear or failure in Alberta. Hey, Have a look in a mirror!!

Getting a little too introspective here. This isn’t about ‘culture’ or borders. FatKat HAD numerous international projects, they obviously fell through for some reason-these were projects that were in play, so the issue wasn’t a bidding war.

It’s also not a ‘regional problem’. For Bill’s benefit I’ll repeat what we’ve been saying here for over two years. PEI and Nova Scotia both announed VERY generous tax credits for the entertainment industry. The New Brunswick government said it was ‘working’ on some type of proposal, then there was silence. So again we come back to the disconnect between people and their government. It’s an interesting theory that its a ‘regional’ problem because Nova Scotia and PEI governments are proactive in building this industry while New Brunswick is not. Although nobody likes to race to the bottom, the fact is that IF your neighbour announces money saving programs for a specific industry, you either match it or you WILL lose out.

So again, the issue is GETTING a bad government to do something right. And again, this is something David has been talking about virtually since the first blog three years ago. I’m not convinced of the point above that IF they had some tax credits they would be all right because they could put in ‘lower bids’. Much of the entertainment industry is run on partnerships, NOT contracts. However, after reading the state of the company, IF he could get a better deal to move to PEI or NS, and he doesn’t take it, that might be ‘patriotic’, but it also is quite stupid when the existence of the company is on the line.

All kinds of companies fail, this isn’t the place for that kind of talk. Virtually every car company in the world is losing money, some may not survive. Entire financial institutions are bankrupt, so its silly to talk about the culture of defeat in a story about a company hitting hard times.

Getting back to the point, I just read the CBC article on this issue. This goes to our conversation about just how interested government is in ‘new’ industries.
The article interestingly states it collected ‘more than one million dollars’ in subsidies. Now, that’s interesting. This is a province where ten million went to Irving simply so they wouldn’t move a pulp mill. A frequent complaint was about Atlantic Yarns, didn’t they get over 65 million dollars throughout their short life? The Credit Union ‘bailout’ was also around 65 million, and the Molson deal gave a HUGE subsidy to a giant profitable company.

So the question I would ask is why the CBC article says “Miramichi company ONLY gets less than 2 million”. This is supposedly a city economically devastated by mill closures,and here’s a company that employed OVER 100 people, that’s a pretty big number. So WHY is there so little government interest? Isn’t this the government that jumps to life when the forestry companies say ‘boo’?

I know its a conspiracy theory, but for all intents and purposes it sounds like they don’t WANT Fatkat around, or at least simply don’t care. It employs young people, is a real standout in town (local businesses have been known to offer discounts to employees-their website talked about being ‘an animation rock star’. Why wouldn’t government officials be scrambling to do whatever it took to help this company? And where are the local MP’s and MLA’s?

This would be an example of Richard’s ‘other corporations’ to counter Irving, and this is how they fare. Perhaps their biggest mistake was not to become a public company, offer shares to New Brunswickers, then perhaps people would be more keen to save it, and the only comment at CBC would be a complaint that the government ‘wasted’ over a million dollars.

At this present time getting caught in a kickback scheme could trigger a lynching. Plus offshore accounts are being heavily scrutinized.
I mean could you see anybody giving out a million or whatever dollars and not receive a bit?
I mean in 1850 Richard Burton could not cross Africa without paying wouchie couchie to every tribe. We are as smart as the 1850 Africans, aren’t we? I know we used to be!

“how did provinces like Ontario and BC (and to a lesser degree, AB), build their industries”

Not sure about AB, but I believe ON and BC had community colleges that were ahead of the curve re animation. More importantly, those provinces have been economically dynamic for a number of years; that attracts population, creates wealth and venture capital. And, yes, in that environment you can fail and begin again. Dynamic economies are more likely to subsidize or incubate new industries. In a less dynamic environment, a single failure can cast a pall over your future. A better question might be “why are the economies of those provinces more dynamic than that of NB?”

It’s quite mind-blowing in how terribly managed it appears FatKat was… sample issues mentioned at the above link: very “questionable” behaviour by the CEO, exploition of employees, getting employees to lie to the government, alcohol consumption during work hours, a seemingly toxic atmosphere, and a whole lot more.

I’m an “economic lefty”, but it’s disappointing that a company like that got so much public money. The government (both Cons and Libs) should have done more due diligence about it.

The worst part is, most of those comments were posted in April 2008. And yet, FatKat managed to get the $500,000 loan guarantee even after that (announced in August 2008).

I don’t know if the animation industry is a good fit for the Miramichi region. Many of the comments at ratemyemployer aren’t too keen about Miramichi as a place to live in (they generally say there’s not much to do, not many restaurants or stores, and no public transportation). My impression is that a lot of animators are artsy hipsters, and Miramichi doesn’t seem like the “artsiest” place to live for hipsters.

But I think Fredericton / Saint John / Moncton would still be alright in that respect.

Finally somebody (A Web Surfer) saying something that makes sense without being caught by emotional attachments. I couldn’t agree more with his third posting (re: Miramichi and, unfortunately, I have to say that a lot more has to be done to make Moncton, Fredericton or Saint John the right place for those people too). That is something that I have been saying here over and over again every time I have a chance.

If the claims about FatKat’s management are true, they would support my view (which is based on experience) that we need to pay extra attention to companies that are too isolated from their markets and competitors.

Finally somebody (A Web Surfer) saying something that makes sense without being caught by emotional attachments. I couldn’t agree more with his third posting (re: Miramichi). And, unfortunately, I have to say that a lot more has to be done to make Moncton, Fredericton or Saint John the right place for those people. That is something that I have been saying here over and over again every time I have a chance.

If the claims about FatKat’s management are true, they would support my view (which is based on experience) that we need to pay extra attention to companies that are too isolated from their markets and competitors.

In my direct experience of dealing with FatKat and Gene Fowler as well as a number of others at that organization over the years, it appeared to me that FatKat was more or less the norm for firms in the animation/e-learning industry. While there undoubtedly were disgruntled employees, the complaints are not inconsistent with other NB firms, large and small.

If we were to withhold funding from FatKat for questionable behaviour, we would probably not end up funding any firm. While Gene would be the first to admit that he is still learning in his management role, I have found him to be a consistent booster of his employees, 24/7.

Aaron King, to respond to your rather churlish comment: those in senior management positions who would candidly admit to still learning in their leadership roles would include, at various times, Lee Iaccoca, Jack Welch, Richard Branson, et. al. Learning does not connote lack of knowledge but rather the perspective that there is more to know, in different ways and that it is an ongoing process.

A more interesting question would be: how much practical management and leadership mentoring exists in New Brunswick to support start-up firms? And what is in the water in New Brunswick to explain the simplistic back-biting, sniping and generally unsympathetic criticism I read in this blog?

I’m looking for folks that have positive contributions to make and ideas to put forward. You will find limited back-biting, sniping and generally unsympathetic criticism at the top of this blog – although I will rant and rave once in a while. I guess all the negativity you see is a reflection of something – not sure what. I hope we can get back to serious conversation about serious issues.

Will you just find something to do and mind your business!! Your nothing but a small minded trouble maker, pampered all your life. So either smarten up or shadup! You and miller would make a good pair. All talk and no hat. The government secured establishment protecting boys. Are you not the dummies with the degrees in charge now as everything falls apart. You wouldn’t know hard work if there was a video showing of it. You probably just clued in to the ,” If i don’t drive like her,I shouldn’t have to pay insurance like her”,lol. Example of the bright boys being advertised to now. YOU!

Here’s something fun…go to ‘ratemyemployer’ and type in “Research in Motion” and start reading. RME seems to be a place where disgruntled employees go to blackball their employers. So by this thinking ALL corporations and companies should be dismantled and run by worker run co-ops with free votes on worker environment (I’m actually fine with that).

As mentioned above, virtually EVERY corporation suffers from the same complaints that are aimed at FatKat. Ironically, while they were successful, their blogs were full of employees raving about how much they loved it (who wouldn’t want a beer during work?)

So that’s not the issue. Animators are the same as anybody else, I know of animators who left Toronto and who loved the Miramichi. As an y animator, FIRST you want a job animating. Second comes the rating of the community. As for industry, in case people missed it, the City of Toronto just ponied up the dough to support a new film studio facility, because, like so many other industries, if they didn’t, the industry would simply disappear. In case people haven’t noticed, there are multi BILLION dollar industries in the throes of death and resurrection by government handouts. What was ‘business as usual’ is changing profoundly.

In this case, the issue is simply about how to build an industry and keep it viable-NOT personal attacks on employers. To defend David’s position, when there is an actual ‘industry’ then people are free to leave an employer they don’t like to work for another, or even work for themselves. All the ‘bad’ things written about FatKat are no different than things that are said about EVERY company. And lets be fair, in the mid nineties forestry unions were telling Irving and other license holders that they needed to get off kraft paper and into high end glossy paper. The industry ignored them, then it cost YOU BILLIONS of dollars to pay for the technology to upgrade the technology when the industry collapsed and they were FORCED to switch to high grade papers.

So let’s be fair, what we are talking about here is the abject failure of private corporations to act in a way that is responsible even to shareholders and society. Well, the alternative is…

“In my direct experience of dealing with FatKat and Gene Fowler as well as a number of others at that organization over the years, it appeared to me that FatKat was more or less the norm for firms in the animation/e-learning industry.”

Yes, the comments at ratemyemployer do mention how screwed-up the animation industry in general is. However, most of them also make it clear that FatKat was much much (much!) worse.

I challenge anyone to read through every single comment there, and then come back and try to defend the workplace environment they had.

“While there undoubtedly were disgruntled employees, the complaints are not inconsistent with other NB firms, large and small.”

I dunno, I think at most firms:

– The CEO doesn’t call everyone “f*ckers” to their face on a daily basis (even if with “friendly” intent)

– Don’t permit alcohol consumption on the job (except perhaps on rare occasions, but not on a frequent basis)

– Get employees to lie to the government about when they started, when they graduated, etc. (apparently as a way to get additional funding) This apparently also caused the employees problems when they subsequently needed EI.

– …go to the site to read the litany of other issues

If we were to withhold funding from FatKat for questionable behaviour, we would probably not end up funding any firm.

That’s not true. I support government investment in strategic areas, but this was clearly a company with a toxic work environment that should not have received so much public funding.

Most firms don’t have the same kind of questionable behaviour that FatKat had. And there are certainly enough decent companies that could receive funding rather than one like this.

Aaron King, to respond to your rather churlish comment: those in senior management positions who would candidly admit to still learning in their leadership roles would include, at various times, Lee Iaccoca, Jack Welch, Richard Branson, et. al. Learning does not connote lack of knowledge but rather the perspective that there is more to know, in different ways and that it is an ongoing process.

Iaccoca, Welch, Branson and others wouldn’t create a work environment anywhere near what FatKat apparently had (not even Branson!

Obviously, everyone continues to learn on the job, but some of the things that apparently went on at FatKat simply blow my mind.

Seriously, read through all the comments at ratemyemployer (including the sub-comments). What went on there is “not normal”, to say the least.

A more interesting question would be: how much practical management and leadership mentoring exists in New Brunswick to support start-up firms?

I think there definitely is. In fact, I think it’s better than in Ontario.

But just as all the tutorship in the world can’t turn Paris Hilton into a nuclear physicist, it seems to me that mentorship and practical management wouldn’t have helped much with FatKat’s leadership.

Yeah, I looked at some of the other companies there, including RIM. But in RIM’s case, it seems like the people complaining are the ones who worked in call centres… the ones who worked in other areas seem to like it a lot. Most call centres would suck to work in, so that’s not hugely surprising, although I personally was surprised that RIM wouldn’t try harder to be better.

Still though, read through the FatKat complaints, and you’ll see it’s DEFINITELY not par for the course in workplace environments… even for the animation industry. Plus, even if the animation industry is “almost as bad” on average, then perhaps the animation industry just isn’t a sector deserving of government investment.

I’m arguing this so strongly, because in the face of people who act like that’s a normal work environment, I feel like “Frank Grimes” from a certain Simpsons episode ( http://en.wikipedia.org/wiki/Frank_Grimes ).

Regarding this comment:

In this case, the issue is simply about how to build an industry and keep it viable

Well, I would say that the investment in FatKat has probably even hurt the industry in NB:

– A lot of people came to NB to work there, had a terrible experience, and have gone back… and have probably told their animator friends, old professors, etc. about their bad experience. It’ll probably make others think twice about coming to NB for a job like that, even if the leadership (of some other company) is the best in the world.

– As I wrote in my first comment, I’m an “economic lefty”. And a poorly-chosen investment in company like this can unfortunately make it harder to gain public support to invest in other companies in the future. For that reason, I actually hesitated before writing my first post above, but I figured the FatKat issues are somewhat widely-known anyway (especially since ratemyemployer is the 2nd search result for FatKat).

but I figured the FatKat issues are somewhat widely-known anyway (especially since ratemyemployer is the 2nd search result for FatKat).”

Actually, getting the truth in this hillbilly Provence is like pulling hens teeth. A bunch of cowards is what you will find looking and watching for their chance at the trough. Still the final result, if you succeed, is a pretty good life in comparison.

Yes, and but that issue has been raised a number of times in this blog.

You might have a point re the management of FatKat, but there is no way that a site like rate my employer can be used as a source of good data. Its too likely to be subjected to abuse, especially where companies are small.

You might have a point re the management of FatKat, but there is no way that a site like rate my employer can be used as a source of good data. Its too likely to be subjected to abuse, especially where companies are small.

True, there’s obviously a self-selection bias with ratings sites like that, since people are more likely to post when they’ve had a bad experience.

However, considering FatKat apparently had something like 110 workers at its peak (so say 150 to 200? people who worked there at one time or another), and the ratemyemployer site has 40 posts about FatKat (along with dozens of sub-comments), that’s a fairly large proportion of employee views… so they’re not just disgruntled outliers.

Plus, even the people who say they liked it acknowledge some of the screwy aspects of the work environment (they just happened to like it that way… lewd jokes, being called f*ckers by the boss, alcohol at work, etc.).

And then there are also the claims (seemingly agreed-upon) about lying to the government to gain extra funding and basically threatening employees to go along with it or else they would be let go.

So basically, despite the “self-selection bias” of ratings sites, the volume of comments, and the way so much of it is agreed upon (even by FatKat supporters) suggests a lot of screwy stuff went on there.

Nova Scotia is actively supporting the game development industry there. A friend of mine recently went on a funded trade mission to San Francisco as part of a local animation firm that is starting to diversify its business from just movies to video game animation as well. As the game industry is growing while the film industry is shrinking, it makes sense I guess. The skills are pretty much interchangeable.

Apparently NSBI covered a lot of the costs to go to SF and Nova Scotia is also promoting its tax credit and university environment to foreign companies to come locate there. They probably are not as organized at PEI yet, as PEI has 6 years of experience in doing this, but Nova Scotia makes a lot of sense when you read their value prop material. My friend even showed me professionally produced marketing material that looks like a game instruction manual. It’s pretty cool stuff. NB needs to get more organized and get with the program. If NS can pick up on this in the last 6 months and already be reasonably organized, NB should be able to as well.

This is a bit off track, the environment of FatKat isn’t the issue. At their peak they had over 100 employees. Government funding goes to companies that have employees and contracts, simple as that. If employees have problems, they can complain, go to the media, quit, call a lawyer, any number of things. I DID go through the postings at the site, and found that many of the posts sounded very much the same, as if written by the same person. Animation is an industry with young workers, who have a VERY different notion of ‘professionalism’-and god bless em. I’d take having a beer at work or a boss using expletives over Irvings constant monitoring of employee’s any day of the week.

Let’s make another comparison, two years ago a doctor, who is head of the Beausejour Medical Facility was touted in the media as having made a cancer discovery. When you read the interview, it was VERY clear that this Doctor had NO idea how to go about turning a medical or scientific discovery into a product, had NO business acumen AT ALL. That’s not surprising, they don’t teach that in medical school.

SO, does that mean that if he’s a bad scientist or a bad boss that cancer research shouldn’t get government money? Of course not. Irvings are about the worst bosses around, they hire truckers on contracts that leave them almost bankrupt every time gas prices go up, they are paranoid about their employee’s, despise any sign of backbone, and I could go on. They are FAR from perfect, yet are pretty much propped up by the government-so again, why should FatKat be held to different standards? How many of those people grousing about FatKat registered complaints? Why was employee turnover so low?

And by all means read the posts, about half of those from people who worked there were quite supportive, many posts were clearly from those who never worked there before. But again, thats not the issue here, nobody holds a guy to an animators head forcing them to work.